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Kenya gives ISPs four months to reduce service charges

o Michael Malakata
02.12.2009 kl 16:01 |

Collusion to fix Internet connectivity prices coupled with lack of willingness to reduce charges by ISPs in the region has forced the Kenyan government to slap a four-month deadline to cut down the charges or face an official price cap.


Collusion to fix Internet connectivity prices coupled with lack of willingness to reduce charges by ISPs in the region has forced the Kenyan government to slap a four-month deadline to cut down the charges or face an official price cap.

The Kenyan government's directive is the first of its kind and is likely to influence other countries in the region to impose similar directives in order to make the Internet cheaper and more accessible.

The Eastern and Southern African regions have two fiber-optic cables, Seacom and Teams, which became operational this year. But despite the competition in the broadband market by the two cables, ISPs have refused to reduce Internet charges, forcing the Kenyan government to issue the deadline. Other countries in the region including Uganda, Rwanda, Mozambique and Botswana are also complaining about high ISP charges.

African governments want connectivity prices reduced in order to allow more people to have access to the Internet. Additionally, many governments in Africa want to start implementing or offering some of their services online through the e-governance and e-learning programs to promote citizens' participation in the running of their countries' affairs.

But the Kenyan government, in a hurry to ensure that the online services are rolled out to people as quickly as possible, has given a March 2010 deadline on all firms to reduce costs on broadband and retail prices to allow Kenyans to have access to the Internet in urban or rural areas.

ISPs claim that they have not been able to reduce the cost of Internet connectivity because they are still buying capacity at higher cost and satellite capacity still being used was acquired at higher costs. The service providers say they want to supply additional bandwidth instead of reduced costs, a strategy to recoup the cost of having bought more capacity than the market required. The Kenyan government, however, claims that there is collusion by the service providers to fix Internet connectivity prices.

"The Kenyan government is very concerned that both Teams and Seacom cables have not helped in reducing the cost of Internet. As such, we have directed that they reduce Internet charges or we will move in to fix the charges," said George Khaniri, Kenyan assistant information minister.

Among other problems contributing to the higher cost of Internet connectivity in the region, shareholders in the East Africa Marine System (Teams) cable are individually negotiating and paying for onward connectivity to Europe from Fujairah in the United Arab Emirates with the owners of the international communications networks. Onwards connectivity to Europe from Fujairah is costly because of cross-connect fees and the recurring costs of leasing bandwidth to destinations in Europe and Asia.

This has not translated into cheaper Internet costs for end users in the region.

However, when the Teams cable went live in September, the issue of recouping investment did not arise. The Teams cable was constructed using public funds but was later sold to private investors in the expectation that the buyers would sell capacity at cheaper rates while the Seacom cable is a privately owned cable developed at a cost of more than US$650 million and runs under the Indian Ocean from India to South Africa. The Kenyan government only has a 20 percent stake in the Teams cable.

On the other hand, service providers claim they will only be able to reduce Internet connection charges in 2011 when their contracts with satellite providers expire and they begin to fully use the bandwidth from the cables.

Several organizations have expressed dismay that the region has once again been caught up in the politics of bandwidth pricing, which may have a negative effect on the development of the telecom sector.

"The politics in the broadband market will definitely pull down the development and growth of the telecom sector as nothing has changed from the times that the cables became operational a few months ago," said Amos Nyangu, assistant information officer, Southern Africa mobile market.

Internet users in the region believe that Internet prices will start coming down next year when the East Africa Submarine Cable System (EASSY) project, another undersea cable running under the Indian Ocean goes live. While the Teams and Seacom cables operates purely on commercial lines, the EASSY project is a World Bank, Africa Development Bank, Germany Development Bank and African governments' funded project premised on the need to open up access to as many people as possible.

The capacity of the cable will be distributed on an open-access basis, allowing service providers to have equal access to the cable and a uniform bandwidth price, which in not available in the region at the moment. Unlike the Teams cable where shareholders pay for onwards connectivity to Europe, shareholders in the EASSY project will not be paying for onward connectivity to Europe as the cable will have a direct route to London and Marseille, France. This makes the EASSY project the first cable in the region to have a direct connection to Europe and will make the cable capacity cheaper.

"The benefits of this are considerable. We are able to minimize latency on the system," said James Wekesa, chief operating officer, West Indian Ocean Cable Company (WIOCC). WIOCC is the largest single shareholder in the EASSY project.

The Kenyan government wants service providers to sell Internet connections at about $200 per megabyte, but the service providers are still holding the price of about $4,000 per megabytes, which is the price for satellite connectivity.

Keywords: Internet  Government  
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